Summaries of health policy coverage from major news organizations

Companies' per-worker health insurance costs in 2004 rose 7.5% -- the smallest rate of growth since 1999, according to an annual report released Monday by Mercer Human Resource Consulting, the Philadelphia Inquirerreports (Goldstein, Philadelphia Inquirer, 11/22). For the report, Mercer surveyed 3,020 public and private U.S. employers in late summer 2004. The survey found that the cost of employer-sponsored health insurance benefits -- including employer and employee contributions to premiums but excluding employee out-of-pocket costs -- rose to an average of $6,679 per employee. By comparison, companies' health benefit costs rose 10.1% in 2003 and 14.7% in 2002, the survey said (Rayner, RichmondTimes-Dispatch, 11/22).

Health costs in 2004 for companies with fewer than 500 workers increased an average of 5.5%, according to the report (Swiatek, Indianapolis Star, 11/22). Next year, employers' cost increases are expected to slow to 6.6%, the Richmond Times-Dispatch reports (RichmondTimes-Dispatch, 11/22).

Reasons for Slowed Growth

The report attributed the slowdown in health cost increases to companies' long-term cost-management strategies, smaller health plan premium increases and slowing utilization of health care services by employees because of rising out-of-pocket costs. The smaller increase in costs for smaller companies is partly because employers with fewer workers have been "particularly aggressive in shifting costs to workers, thereby reducing use of the health care system," the Los Angeles Times reports.

One cost-management strategy increasingly used by employers is disease management, according to the survey, which found that 55% of large companies offered a diabetes disease-management program, and 46% offered a heart disease- and hypertension-management program (Cohn, Los Angeles Times, 11/22). Among employers with 20,000 or more workers, 70% offered disease-management programs, according to the survey.

Consumer-Directed Plans, Cost Shifting

Employers also are "showing considerable interest in consumer-driven health plans" as a way to reduce costs, the Times-Dispatch reports (Richmond Times-Dispatch, 11/22). This year, only 4% of employers nationwide offered such plans, but that proportion is expected to increase to 14% of employers in 2005 and 26% in 2006, the report found (Philadelphia Inquirer, 11/22). The report also attributed the slowdown in companies' health cost increases to an apparent "dampening utilization" of health care services by employees because of higher out-of-pocket costs (Los Angeles Times, 11/22).

In 2003, companies "significantly raised deductibles and copayments" to offset rising premium increases, and those steeper out-of-pocket costs "helped slow employers' medical spending more than anticipated this year," the Wall Street Journal reports. More than 20% of employers plan to increase cost-shifting efforts next year by raising deductibles and copays, and an equal percentage said they plan to raise employees' premiums, according to the report. According to the Journal, such cost-shifting efforts in 2005 will be "more restrained than in 2003," the report said (Fuhrmans, Wall Street Journal, 11/22).

Other Findings

The survey also found that more employees are offering PPOs (Richmond Times-Dispatch, 11/22). Among small companies, 31% offered a PPO plan with a deductible of $1,000 or more, compared with only 6% of large employers, according to the survey. The survey also found that large employers in the northeastern and western United States are "significantly more likely" to offer domestic partner benefits to employees than companies in the midwestern and southern United States.

In addition, despite the slowdown in health care cost increases, the survey found that 97% of companies surveyed said that the U.S. health care system is in need of significant reform (Los Angeles Times, 11/22).

Reaction

"The survey shows that when employees are being asked to pay more out of their own pockets ... you think twice about going to the doctor if you have a cold," Eugene Alexander, a senior consultant with Mercer in New Jersey, said. He added, "The downside, of course, is that you may also put off getting necessary care. And that's not good for anyone" (Fitzgerald, Newark Star-Ledger, 11/22). Barry Schilmeister, a senior health care consultant for Mercer, said, "What we've seen for a couple of years running now is that employers have made very significant changes to their programs to cut three to four points of that inflation rate." He added, however, that overall growth in health care costs remains worrisome, noting, "[u]nderneath it all, while general inflation is 2%, medical inflation continues to be 10-plus percent. We still have a significant problem to deal with." Schilmeister said that rising prescription drug costs are of particular concern (Abelson, New York Times, 11/22).

Helen Darling, president of the National Business Group on Health, said that despite the slowdown, the "dollars are still very daunting" (Wall Street Journal, 11/22). Praveen Thadhani, a senior health care consultant in Mercer's Los Angeles office, said, "It's definitely good news in that [the growth rate] is less than it used to be and that it doesn't appear to be going back up next year. ... But it's still growing at a faster rate than inflation and wages. That's not a good thing" (Los Angeles Times, 11/22). The survey is available online.

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